Today, all eyes are on the Bank of England (BoE) for its interest rate announcement. The consensus is that officials will hold rates at 4.0%, with the vote likely splitting 6–3 in favor of no change. If things play out as expected, investors will probably see a brief, small jump in volatility for the GBPUSD pair. Nevertheless, their true reaction depends on whether the vote split delivers a surprise.
The market is now pricing in over 30% chance of a rate cut to 3.75%. That's a big shift from just a month ago, when the odds were only around 10%.
Even though UK inflation is still sitting at 3.8%—the highest among major economies—there are some early signs that pressures are abating. The labor market is cooling off, and with the government hinting at tax hikes, the BoE might feel that, at its meeting on Thursday, it has the room to start monetary easing sooner rather than later.
Earlier this week, UK Chancellor of the Exchequer Rachel Reeves set the stage for significant tax increases to avoid a return to "austerity," framing her budget as one of "tough choices" meant to protect public services and tackle the national debt.
Given the unlikely—but still possible—scenario where more than four members vote for an immediate rate cut, GBPUSD may come under selling pressure for several days.
The ultimate recommendation is to sell GBPUSD if the price rebounds from the previous local low of 1.3100 and more than four members vote for a rate cut. Place Take profit at 1.3016. Set Stop loss at 1.3150.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
